The Supreme Court order banning the registration of vehicles with diesel engines displacing 2 litres and more may cover only the National Capital region, but its impact on buyer sentiment is country-wide, say industry executives.

Sales of petrol cars and SUVs in January–February 2016 grew 7% from a year earlier, whereas those of diesel-driven personal vehicles fell 7.3%, industry sources said, citing the ban announced in December and the narrowed gap between the prices of the two fuels as the key reasons. The share of diesel vehicles in overall passenger vehicle sales shrank to 42% in the first two months of this year from 45% in the year-earlier period.

“Diesel passenger vehicles have suffered a double-edged attack, first because of the shrinking gap between petrol and diesel prices … (and) then the SC ruling,” a top executive at a car maker told ET on the condition of anonymity. This has not only hurt the sales of big diesel vehicles, but also hit inquiry on smaller diesel cars, he said.

About 4 lakh units of diesel vehicles with 2-litre or heavier engines are sold in the country annually, industry experts said. The NCR comprising Delhi and its satellite cities is the biggest automobile market, and absorbs 5-8% of this diesel vehicle supply. Across India, Mahindra & Mahindra has more than 50% share of the market for diesel-run vehicles displacing 2 litres or more, while Toyota has about 20% and Tata Motors less than 5%. Overall, NCR accounts for nearly 12% of passenger vehicle sales in India, with Delhi making up for 7%.

The ban was to end on Thursday, but the court extended it until further orders. This and the suggestion of an environmental compensation charge on diesel vehicles have worried auto makers at a time when the market has returned to sluggishness after showing some promise. They are unhappy also with the budget announcement to impose an infrastructure cess, where too diesel vehicles attract a higher levy than petrol.

The court order has impacted the sale of even smaller diesel cars as uncertainty and anxiety prevails, said Jnaneshwar Sen, senior vice president of sales and marketing at Honda Cars India.

His counterpart at Hyundai Motor India, Rakesh Srivastava, sought consistency on policies covering the sector, and said: “The contribution of diesel vehicle to overall industry volume is on the decrease … uncertainties on registration have led to lack of customer confidence.”

With buyer preference again shifting to petrol and authorities discouraging the sale of diesel vehicles, the most impacted are luxury brands such as Mercedes-Benz, BMW and Audi

To be sure, sales of diesel vehicles have been on the decline even before the court imposed the ban in NCR to test its impact on the quality of air. In the financial year ended in March 2015, diesel car sales dropped 5.7% from the previous year, while those of petrol cars rose 12.35%. Diesel has been increasingly moving out of the radar of Indian buyers ever since the government removed subsidy on the fuel, reducing the price gap with petrol.

In 2011, diesel was 35% cheaper than petrol, while now the difference is just 19%. Auto makers had invested heavily in diesel technology in India and made changes to product mix to benefit from customer preference to diesel when that fuel was sharply cheaper.

Now, with buyer preference again shifting to petrol and authorities discouraging the sale of diesel vehicles, the most impacted are luxury brands such as Mercedes-Benz, BMW and Audi. Mahindra and Toyota are also at the receiving end. These companies are reworking on production and supply strategies.

“We have adjusted the engine mix to meet the petrol demand in Delhi-NCR, which includes higher allocation of petrol models,” said Joe King, head of Audi India. “These short-term decisions have led to increased uncertainty for the future, not just for manufacturers but also for dealers and customers. Clarity on policy directions is crucial for manufacturers like us to align our strategy in line with the customer demand.”

Toyota is planning to launch petrol variants of the Innova and Fortuner soon, while Mahindra has already launched its popular SUVs with engines smaller than 2 litres to avoid the court-imposed ban.